Chinese brokers have extended 2.1 trillion yuan ($339 billion) of margin finance to investors, double the amount at the start of the year. But this often-cited figure is only part of the mountain of debt taken out to finance share purchases. Another 1.7 trillion yuan may have flowed into stock market investment from wealth management products, online lending sites and other sources, according to a Bloomberg survey of analysts.

Investors trying to sell Chinese shares have found themselves locked out of 72 percent of the market.

At least 1,331 companies have halted trading on mainland exchanges, freezing $2.6 trillion of shares, or about 40 percent of the country’s market capitalization. Another 747 fell by the 10 percent daily limit on Wednesday, making it all but impossible to find buyers at the prevailing price.

In the latest salvo against short sellers, who bet on falling prices, official news MAPS Xinhua said police were investigating suspected "malicious" selling of shares. The probe showed that the authorities would "punch back" with a "big fist" against illegal activities, Xinhua said on its microblog.